The Delaware Supreme Court’s Clarification of Limited Partner Rights to Books and Records, and What It Means for You

In a recent ruling on the case of Murfey v. WHC Ventures, LLC, the Delaware Supreme Court concluded that a limited partner seeking the books and records of a Delaware limited partnership is not required to show that the materials requested are “necessary and essential” unless those terms are expressly stated in the limited partnership agreement. The plaintiffs had requested tax information for the six most recent taxable years of the partnership; the legal dispute surrounded the plaintiffs’ access to, and retention of, copies of the other limited partners’ Schedules K-1. The Delaware Supreme Court concluded that the partnership agreement did not include clear enough language to establish the intent to apply the “necessary and essential” standard.

The implications of this case are of special concern to managers of hedge, private equity and venture capital funds, as the threshold that must be satisfied to entitle a limited partner to information, specifically information about the partnership and other partners, has now been lowered. For managers of Delaware funds seeking to limit access, the “necessary and essential” clause will need to be expressly included in their partnership agreements. Managers of existing funds may find it difficult to amend their existing partnership agreements to include this language. We suggest that you consult with your attorney as to how best to address this matter.

As always, please contact your Anchin Relationship Partner or Jeffrey Rosenthal with any questions that you may have.